Should I accept or reject the new rate "offers" from CC companies?

[Anonymous]

A lot of us are getting mail from our CC companies about a new higher rate.  Should we accept or reject these new "offers".

My situation:

I have 7.9% with chase (after a 12 month 0%) and am working on paying off a balance.  I just got a notice that they are raising the rate to 13.9% in Jan 10. If I reject their offer, they will close the CC (which I don't use anyway) and I can pay off the balance at 7.9%?

(Brief History: Chase had raised my credit line on a card I rarely used to 35K in Sep 08. I xfered 18k to it at 0% teaser and began paying it off.  In April 09 with $14K on the card they lowered my limit to $16k, thrashing my ratios. October 09, the promo 0% expired and went to the current 7.9%)

Should I reject their offer? 

How will this affect my credit?

Will this further trash my debt ratios? (amount owed is theoretically higher than card limits)

I have other cards with smaller balances that are also hiking rates as well.  Thoughts?

Thanks for your advice. 

[Uborrow-Upay]

Welcome to the forum, Bardo10!

With the limited details you have provided, I'd say reject the new terms and close the card.

Think with your wallet, not about your scores.  Are you willing to pay an extra $70/month to retain this credit card?  You say you never used it anyways before this transfer.

Your utilization won't change with this closure, as you're carrying a balance.  The card credit limit will still figure into your utilization.  The damage to your score already happened back when they lowered the limit on this card.

Try to pay off the smaller card balances one at a time to reduce the number of accounts with balances.  That may help your overall score.

Sorry if this doesn't answer your question, but that's the best I can do with the info provided.

[Anonymous]

Thank you for your quick response.  I'd be happy to provide more details if that would help.  Overall, I think you answered my primary question, which is "will closing an account affect my ratios?"

I no longer use credit cards for any purchases, but I understand the value of having credit available as a way to help boost the score. 

Also, you suggested paying off lower balances first.  Clearly, I should start with the highest rates first, correct?

Thanks again for your advice! 

[Uborrow-Upay]

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Bardo10 wrote:  Also, you suggested paying off lower balances first.  Clearly, I should start with the highest rates first, correct?

Thanks again for your advice! 

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You're welcome.

If you are thinking with your wallet, pay off the highest APR cards first to save on interest.

If scoring matters to you, you may want to pay off the easiest ones (lowest balances) first, to reduce the number of accounts reporting balances.  You'll want to keep that number of accounts reporting balances below half of your total number of accounts (clarifications by others welcomed here).

There are varying schools of thought on how to go about paying down debt, in the long run it's the paying down that matters.  

[Anonymous]

Thank you!  It's very frustrating.  I was trying to manage my ratios, balances, cards with credit on them. I never used the cards after the balance transfers, but the CC companies that you and I bailed out are not playing nice.  Unused cards get cancelled.  Cards that I am paying off get higher and higher rates with lower and lower limits.  Once they're gone, I'll never use the [expletive] CC's again.

[Uborrow-Upay]

You're not alone in feeling that way, Bardo10!   You've got lots of company on these boards, including me...and I'm a pay in full type, no balances to speak of, except on business accounts...and I'm sick of all of this, too! 

I have the answer to all of this credit card company cr*p, but I can't post it here as it would be considered "too political".  But even if my plan worked, these banks would figure out a way to bill you for using cash.  And they'd get away with it, too...the shareholders in Congress would see to that, for sure.

Just keep on keepin' on.

[Anonymous]

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@Uborrow-Upay wrote:

You're not alone in feeling that way, Bardo10!   You've got lots of company on these boards, including me...and I'm a pay in full type, no balances to speak of, except on business accounts...and I'm sick of all of this, too! 

I have the answer to all of this credit card company cr*p, but I can't post it here as it would be considered "too political".  But even if my plan worked, these banks would figure out a way to bill you for using cash.  And they'd get away with it, too...the shareholders in Congress would see to that, for sure.

Just keep on keepin' on.

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I do wonder about a method that's more political than the statement about the shareholders in Congress.  But unless we are getting RJ's and CLD's and "upgraded" to ultimate (1%) rewards by credit unions, must we really go all the way to using cash? If we moved our spending, and merchant fees, over to a credit union we happen to like, does it not send a message to the big banks as well?

[Uborrow-Upay]

pNa, you may very well be right.  I just feel that it's not the banks who need a message.

(And I'll stop right there...hopefully having kept within TOS).